QUARTERLY REPORT
For June 30, 2010

ERECT FUNDS I / DEBT – PROJECT UPDATES

HERITAGE VALLEY HEALTH SYSTEMS MEDICAL BUILDING, BEAVER FALLS, PA – On June 7, 2010, ERECT Fund I / Debt closed a first mortgage construction loan in the amount of $3,077,300 to an affiliate of Castlebrook Development, Inc. Construction is underway for a medical office building that will be acquired by Heritage Valley Health Systems, Inc. at completion in early 2011, pursuant to an executed purchase agreement. The structure will be a single-story, family-practice medical facility with approximately 13,500 square feet situated on a half-acre at Seventh Avenue and Twelfth Street in downtown Beaver Falls, Beaver County, PA. The facility will be used to expand Heritage Valley’s physician practice and start a local residency program associated with its hospitals. The interest rate during construction will be 7.25%.

BAKERY SQUARE AT EASTSIDE, PITTSBURGH, PA – As construction completion draws near, leasing activity at Bakery Square remains brisk. This project has 216,000 SF of office space and 174,000 SF of retail space, along with a six-story parking garage and a SpringHill Suites by Marriott hotel that had its grand opening on May 1st. The University of Pittsburgh has taken occupancy of 24,346 SF of office space, and Google will take occupancy of its 43,490 SF of office space on August 16th which will bring overall office leasing to 31%. Walnut Capital, the project developer and manager, is negotiating lease terms with a variety of corporate and institutional users for the remaining office space. With respect to retail tenants, Urban Active Fitness Center opened its 41,550 SF space on June 14th, while Anthropologie (11,220 SF) and Coffee Tree (1,750 SF) opened on June 24th. Verizon signed a lease for 2,700 SF and is scheduled to open on August 1st which will bring retail occupancy to 33%. Walnut Capital is negotiating lease terms with a variety of retail and restaurant users for an additional 48,500 SF. This project has a total cost of approximately $115,000,000. Erect Fund I / Debt provided a $10,500,000 loan for the purchase of a Tax Increment Financing (TIF) Note from the Urban Redevelopment Authority of Pittsburgh in April 2009.

HAMPTON INN MASSILLON, OH – This 75-room hotel located in downtown Massillon, Ohio has a conference facility, fitness center, complimentary breakfast area and attached parking garage. The hotel was constructed in 2000. Each year the Borrower uses funds from its FFE reserve escrow for improvements to the hotel as required by Hilton Hotels. Improvements to the hotel so far in 2010 include fitness center upgrades to the new Hampton Jump Start Fitness Center theme. Other areas planned for refurbishment this year are breakfast area and lobby furniture, security system and internet access upgrades, and some exterior caulking. Hilton Hotels performed its semi-annual inspection of this property in May 2010 and the hotel achieved an “outstanding” designation. Loan payments are current.

ERECT FUND II / EQUITY – PROJECT UPDATES

BRIDGESIDE POINT II, PITTSBURGH, PA – ERECT Fund II / Equity is a limited partner (along with ERECT Co-Participation Fund and Highmark) in BPA II, Ltd., a five-story, 160,000 SF office and bio-technology research building recently constructed on 1.7 acres in the Pittsburgh Technology Center off Second Avenue in the City of Pittsburgh (Hazelwood section). The University of Pittsburgh (“Pitt”) has now executed amendments to their original lease and will lease 159,533 SF, occupying space on all floors of the building. Pitt will move into the remaining half of the second floor by December 2010. A related entity, the Pittsburgh Tissue Engineering Initiative, has leased 1,453 SF on the second floor. The equity partners increased their investment in the building in order to cover increased tenant improvement costs due to Pitt’s lease amendment. The ERECT Funds made an additional contribution of $289,052 for a total investment of $6,439,052. The ERECT Funds are receiving monthly preferred return payments equal to 11%.

OXFORD ATHLETIC CLUB, WEXFORD, PA – ERECT Fund II / Equity has a $4,000,000 investment in this 135,008 SF health club which includes weight training equipment, indoor track, basketball courts, indoor and outdoor swimming pools, racquetball courts, indoor and outdoor tennis courts, locker room facilities, spa, children’s daycare and pro shop. Constructed in 1998, the project is well maintained. Capital expenditures budgeted at $250,000 for 2010 include server and software upgrades, air handlers, atrium carpet, kid-zone furnishings, pool furniture, spin bikes, elliptical machines, and tennis court benches. While the club experienced declining membership from August 2009 to March 2010 down to 2,344 members, over the past three months that level has come up slightly and is now at 2,366 members. In the third quarter of 2009, ERECT received a distribution of $250,000, and in June 2010 ERECT received another $200,000.

SPRINGSIDE PLACE OFFICE BUILDING, BATH TOWNSHIP, OH – ERECT Fund II / Equity has a $2,295,018 investment in 320 Springside Place, an office building containing 92,843 SF in Bath Township, near Akron, Ohio. Since securing Dominion East Ohio Gas as its largest tenant (53,717 SF) in the second quarter of 2009, the property is 95% leased and occupied and ERECT has received a cash return of 14.7% over the past 12 months.

TURNPIKE DISTRIBUTION CENTER, BIG BEAVER BORO, PA – ERECT Fund II / Equity (including ERECT Co-Participation Fund and Highmark) have a total investment of $3,462,500 in this 410,000 SF bulk warehouse and distribution center on 39.11 acres near the intersection of I-76 and I-376 in Beaver County, PA. The cash-on-cash return for the last 12 months was 11.58%. The building is 71% occupied by two tenants, Iron Mountain and YRC Logistics Services. YRC Logistics’ parent company, YRC Worldwide, recently announced it has entered into a definitive agreement to sell YRC Logistics to Austin Ventures, a strategic private equity investor. This logistics business will operate as a private company owned by Austin Ventures. The sale will form the basis for a new company specializing in international freight forwarding, customs brokerage, transportation management, truckload services, and dedicated warehouse and fulfillment services in North America, Latin America, Europe and Asia.

WESTINGHOUSE ELECTRIC COMPANY, CRANBERRY TOWNSHIP, PA – On October 9, 2009 ERECT Fund II / Equity closed a new partnership called Cranwoods-WST, Ltd. owned 50% by ERECT Fund II / Equity and 50% by an affiliate of The Ferchill Group. ERECT contributed $5,120,000 in equity for the construction of a three-story office building with approximately 118,582 square feet situated on 24.7 acres in Cranberry Township, Pennsylvania. The site is adjacent to the new 915,000 SF headquarters facility which was recently completed for Westinghouse. Work is progressing and at June 30, 2010 construction was approximately 78% complete. Construction of the building is to be completed in stages with the third floor to be completed October 1, 2010, the second floor to be completed October 15, 2010, and the first floor to be completed November 1, 2010. ERECT is receiving a 5% preferred return during construction, and will receive a 12% preferred return upon total completion.

ERECT FUND PERFORMANCE

ERECT Fund I / Debt – At June 30, 2010, the Fund had a three-month return of 2.38% and a 12-month return of 5.06%. These results compare favorably to the March 31, 2010 three-month return of 1.57% and 12-month return of 0.90%. This performance reflects unrealized gains on several assets, including Bakery Square, Mansions on Fifth and Pennwood Commons.

ERECT Fund II / Equity – At June 30, 2010, the Fund had a three-month return of 10.55% and a 12-month return of 6.16%, which compare favorably to the March 31, 2010 three-month return of -6.33% and 12-month return of -7.30%. These results reflect a significant increase in the appraised value of Airside Business Park, as well as a modest increase in the appraised value of Cranberry Business Park.

ERECT Co-Participation Fund – At June 30, 2010, the Fund had a three-month return of -0.83% and a 12-month return of -1.37%, which compare to the March 31, 2010 three-month return of 1.33% and 12-month return of -5.41%. These results reflect unrealized losses due to lower appraised values of certain assets including the RAND Building (Fifth and Craig Street, LP) and the Giant Eagle Shadyside (South Negley Associates, LP).